Tokyo Steps Up With Asia’s First Emissions Trading Scheme

In an effort to put into action his commitment to reducing Japan’s greenhouse emissions by 25 percent from 1990 levels by 2020, Environment Minister Sakahito Ozawa recently announced the launch of a mandatory scheme to reduce carbon dioxide emissions from large office buildings and factories and kick off Asia’s first cap-and-trade program.

The move aims at reducing the demand that Japan currently has as the world’s third largest crude oil importer and consumer of more than 1,500 kiloliters each year. The country currently operates under a voluntary carbon market, meaning companies choose to opt into the scheme, but the new bill would mean that some of the larger carbon emitters in Japan would be forced to come on board and start to take action to reduce their carbon output or face buying permits for every ton of emissions over their targets. “This is an epoch-making step. Each company for the first time will have to come up with a strategy to control its emissions and meet a target that is obligatory,” commented Noboyuki Yamagashi of WWF Japan.

The plan sets out two periods for it to be introduced: fiscal years 2010–2014 will see the launch of the first phase, requiring those who fall under the bill to cut CO2 by six to eight percent from levels between 2002 and 2007. Phase two, from 2015 to 2019, would then up the amount to be cut to 17 percent. In setting financial incentives polluters are more inclined to begin to take steps to bring their companies in line with a greener and more sustainable model. The idea is that this would then spark more investment into cleaner energy, and thus a move away from traditional fossil fuels on which we reply so heavily today. Companies that find it difficult to cut emissions to the required levels then have the option of purchasing carbon credits from those companies who have managed to limit their outputs below the statuary limits set.

While this certainly looks like a positive step from Hatoyama’s party in the run up to an election in the Upper House in July, there are however limitations to the bill. As it is confined to the Tokyo prefecture only, the impact it will have is questionable. The capital city and surrounding areas account for a mere five percent of Japan’s total CO2 output, and within that the factories and companies that will be affected by this bill account for a mere one percent. However in the press release put out on April 1 the government mentioned that the bill was to serve as a “case study for the Japanese central government, which plans to design a nationwide trading system within a year.” The action has potential impact outside of Japan also. “It’s the first attempt ever in Asia, and there’s a potential it will inspire cities and provinces in China,” said Toru Morotomi, associate professor at Kyoto University’s Graduate School of Economics. Therefore the importance of this first step is not to be undermined; as long as sufficiently audited and implemented, this could well start paving the way for a brighter outlook for Japan in the years to come.